Brown v Brown
[2021] NZHC 2030
•6 August 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-948
[2021] NZHC 2030
UNDER Part 18 High Court Rules, The Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949 IN THE MATTER
of the estate of RICHARD BROWN
BETWEEN
DANIELLE BROWN
Plaintiff
AND
NICHOLAS BROWN AND
ROBERT NAREV AS EXECUTORS AND TRUSTEES OF THE ESTATE OF RICHARD BROWN
Defendants
…/cont
Hearing: On the papers Appearances:
S R Jefferson QC and J L Thomas for Plaintiff in CIV-2019-404- 948
M G Locke for Plaintiff in CIV-2019-404-1212 P McKendrick for the Defendants
A H Waalkens QC and S A Beattie for Nicholas, Interested Party G Bogiatto for Sarah, Interested Party
H Fulton for Brodie, Interested Party
Judgment:
6 August 2021
JUDGMENT OF GORDON J
[As to costs]
This judgment was delivered by me
on 6 August 2021 at 12.45 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BROWN v BROWN [2021] NZHC 2030 [6 August 2021]
CIV-2019-404-1212
UNDERPart 18 of High Court Rules, the Family Protection Act 11955
IN THE MATTER of the Estate of RICHARD BROWN BETWEEN BELINDA BROWN
Plaintiff
AND NICHOLAS BROWN AND
ROBERT NAREV AS EXECUTORS AND TRUSTEES OF THE ESTATE OF RICHARD BROWN
Defendants
Solicitors: Schnauer and Co Ltd, Auckland
Davenports West, Auckland Glaister Ennor, Auckland Denham Branwell, Manukau G Bogiatto, Auckland
R Wood, Auckland
Counsel: S R Jefferson QC, Auckland
A H Waalkens QC, Auckland H Fulton, Auckland
M Locke, Auckland
Introduction
[1]Richard Brown1 died on 12 August 2018.
[2] Claims were made under s 4 of the Family Protection Act 1955 (the Act) by: two of Richard’s three children, Danielle and Sarah, for further provision from their father’s estate; one of Danielle’s three daughters, Belinda, for provision from her grandfather’s estate;2 and Sarah’s son Brodie, for further provision from his grandfather’s estate.
[3] The applications were opposed by Richard’s third child and primary beneficiary, Nicholas (in his personal capacity).3 Nicholas is also an executor of the estate along with solicitor, Robert Narev. The executors abided the decision of the Court.
[4] In my judgment, I dismissed all of the claims having found no breach of moral duty.4
[5] I reserved costs and directed that if the parties could agree costs, a joint memorandum should be filed. Costs have been agreed as between Danielle, Nicholas and the executors. Costs have similarly been agreed as between Sarah, Nicholas and the executors. I have made orders by consent in consequence of those two agreements. There is no claim for costs against Brodie, given his personal circumstances.
[6] That just leaves the granddaughter Belinda. Costs have not been agreed between Belinda and Nicholas nor between Belinda and the executors. The parties have filed separate memoranda. This judgment determines the costs claims against Belinda.
1 This is not his real name. Having regard to the allegations made (which are of a sensitive nature), I did not use the real names of any of the family members in my substantive judgment Brown v Brown [2021] NZHC 1045.
2 The youngest of Danielle’s daughters, Rachel, also made a claim under s 4 of the Act for provision from her grandfather’s estate. She settled her claim prior to the hearing for $20,000.
3 Each future reference to Nicholas is a reference to him in his personal capacity.
4 Brown v Brown, above n 1.
[7] Nicholas seeks costs of $24,279, being a 100 per cent uplift on standard 2B costs of $10,889.50 ($21,779.00) and $2,500 for the present costs application.
[8]The executors seek $10,164.25 in standard 2B costs against Belinda.
[9] Belinda does not take issue with the categorisation of costs on a 2B basis but submits that costs as between her and the estate and as between her and Nicholas should lie where they fall or at least a substantial reduction in scale costs is appropriate.
[10] Belinda also says that it would be in the interests of justice to stay the enforcement of any award of costs pending determination of the appeal she has now filed against my judgment.5
Costs principles
[11] The starting point in any costs assessment is that all matters with regard to costs are at the discretion of the Court.6 This discretion, however, is not an unfettered one and is to be guided by the general principles in rr 14.2–14.5 of the High Court Rules 2016 (HCR). A fundamental costs principle is set out in r 14.2(1), which provides that the party who failed with respect to a proceeding should generally pay the costs of the successful party. The rules are intended to create a framework for determining costs in individual cases that is both “predictable and expeditious”.7
[12] Ultimately, the overriding consideration when exercising a discretion to award costs is that any award ought to do justice between the parties.8
Should costs lie where they fall?
The estate
[13] Mr Locke, for Belinda, submits the estate is a very substantial one and that neither Nicholas nor any of the other residuary beneficiaries will have their interests
5 Brown v Brown, above n 1.
6 High Court Rules 2016, r 14.1.
7 Rule 14.2(g).
8 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].
in the estate, or their overall financial position, substantially eroded by legal costs incurred in the proceeding. While Mr Locke submits that the bulk of legal attendances incurred by Nicholas would have been in relation to the claims by Debbie, he acknowledges that is not necessarily the case for the estate.
[14] Mr Locke notes that the claim for costs is made on the basis of a four-way apportionment. He submits that any costs should be apportioned five ways to take into account the granddaughter, Rachel. Although she settled her claim, by the time she did so she had filed a statement of claim, an affidavit in support of her claim, and an affidavit as to financial means.
[15] For the executors, Mr McKendrick submits that Belinda’s claim was unmeritorious and the costs of the defendant executors burden the residuary beneficiaries of which Belinda was not one. In response to the submission that scale costs be split five ways, Mr McKendrick submits that scale costs are already a concession. As far as the division of costs, Mr McKendrick notes that Rachel was self-represented and there were few attendances in relation to her prior to the trial.
[16]In Fry v Fry, Asher J referred to the position of executor’s costs as follows:9
[11] In such proceedings there is generally a need for the executor to be represented in the proceedings as the notional defendant, and so that the net assets of the estate and any other issues relating to the estate can be properly put before the Court. It is often the case that in such proceedings there is no actual appearance for the executor at the trial, the executor having provided the necessary information and abiding the decision of the Court. The general approach in such cases is that the actual costs of the executor come out of the estate.
[17] However, in Talbot v Talbot,10 it was held that where the costs of the executors unfairly burden the residuary beneficiaries, and the plaintiff’s claim was unmeritorious, the Court may award the executors costs against the unsuccessful plaintiff personally.
9 Fry v Fry [2015] NZHC 2716 at [11].
10 Talbot v Talbot [2017] NZHC 257.
[18] In this case, although the executors abided the decision of the Court, counsel for the executors appeared to assist the Court. Belinda was not a beneficiary under the will and the executor’s costs in relation to Belinda would unfairly burden the residuary beneficiaries. This is especially so in circumstances where I found Belinda’s claim against her grandfather was unmeritorious.11
[19] For those reasons, I do not consider that costs should lie where they fall. In other words, the estate should not bear the cost of defending Belinda’s claim. Nor do I consider, for the reasons advanced by Mr McKendrick, that the costs should be divided five ways rather than four ways as proposed by the executors.
[20] The items claimed by the executors are appropriately claimed. Accordingly, I would award 2B scale costs in the sum of $10,164.25 to the executors against Belinda subject to my consideration of Belinda’s claim of impecuniosity, which I address later in this judgment.
Nicholas
[21] In Fry v Fry,12 Asher J also commented on the approach to costs in respect of a plaintiff who challenges a will and the beneficiary who seeks to uphold it. Asher J noted in the past, like the practice for payment of the executors’ costs, there may have been something of a practice for all costs accrued from a reasonably pursued claim to come out of the estate.13 However, as the Judge noted, there is no longer a general rule that the costs of all parties should be paid out of the estate in a family protection claim.14 Over the years an approach that more reflects the philosophy behind the present costs rules has developed, whereby the estate does not bear the costs and scale costs are awarded, payable by the parties in accordance with established costs principles.15 Asher J stated though “there is by no means a settled practice”.16
11 Brown v Brown, above n 1, at [204]–[216].
12 Fry v Fry, above n 9.
13 At [12].
14 Fry v Fry, above n 9, at [13] citing Re Miller (costs) (2001) 20 FRNZ 459 (HC) at [6]; and
Critchley v Saunders [2014] NZHC 1113 at [19].
15 Fry v Fry, above n 9, at [14].
16 At [14].
[22]The position referred to by Asher J is reflected in the commentary in
McGechan on Procedure where it is stated:17
The traditional, but never invariable, practice was to order the costs of all parties to be paid out of the residue of the estate. However, such an order can impact unfairly on the residuary beneficiary, particularly if the estate is not large. Perhaps for that reason, the court, in a defended Family Protection proceeding, often left costs to lie where they fell, with the result that the parties had to meet their own costs out of their respective shares of the estate.
More recent cases suggest costs in Family Protection cases should not be excluded from r 14.2 costs principles, in particular the principle that costs should follow the event. …
An order that costs follow the event was departed from where, for example, a plaintiff with a small share of a substantial estate is unsuccessful, but had a claim that was arguable and had some merit. Vincent v Lewis HC Auckland CIV-2002-404-2440, 26 April 2006 was such a case.
Recent cases are helpfully collected by Asher J in Barker v Barker HC Auckland CIV-2006-404-181, 7 December 2006 at [18].
[23] In this case, Belinda initiated her own proceeding against her grandfather’s estate. There was little to no merit in Belinda bringing a claim under s 4 of the Act without substantial evidence of a strong relationship between her and Richard. As noted in my judgment, Mr Locke for Belinda acknowledged the clearly established legal principle to the effect that a grandchild will have difficulty in pursuing a claim where his or her parent is still alive.18 I found that the primary obligation to provide for Belinda lay with her mother, Danielle.19 I also did not accept Belinda’s argument that she should be treated equally with the other grandchildren.20
[24] Moreover, on the facts, it was not established that Richard had breached any moral duty in relation to Belinda. Her case was not in the category of cases where a grandchild was given the same status as a child.21 Nor was it a case where there was a special relationship between grandparent and grandchild such that further provision
17 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HRPt14.16].
18 Brown v Brown, above n 1, at [204].
19 At [213].
20 At [215].
21 At [213].
was warranted.22 The evidence showed that Belinda had limited contact with her grandfather throughout her life.
[25] I accept Mr Waalkens’ submission that given the lack of merit apparent in Belinda’s claim, Nicholas had no choice but to defend the claim.
[26] In all those circumstances, the normal costs principles apply. Belinda, as the loser, should pay Nicholas’ costs subject to my consideration of her claim that she is impecunious, which I address next. In respect of quantum there is also Nicholas’ claim for increased costs, which I address after I have considered Belinda’s claim of impecuniosity.
Belinda’s claimed impecuniosity
[27] Mr Locke advises that Belinda did not have the funds to privately instruct counsel. Legal representation has only been able to proceed on the basis of a fee arrangement that is conditional on her receiving an award from the estate. That conditional fee arrangement continues for the purposes of the appeal Belinda has brought.
[28] Mr Locke refers to Belinda’s evidence that she has recently suffered from leukaemia (presently in remission) and as a consequence of her illness, she and her husband experienced very difficult financial and personal circumstances. Mr Locke says she is unable to pay any costs ordered. He also submits that Belinda has incurred greater costs than other parties as it was necessary for her to file her own proceeding in order to avoid the risk of her claim becoming statute barred (not being aware that her mother, Danielle, had already filed her own proceeding by that time). Mr Locke submits that Belinda, having of necessity filed her own proceeding, has provided a platform for the claims of other parties. She has therefore incurred greater costs, albeit for the most part of a conditional nature.
22 At [213].
[29] The HCR provide for circumstances where the court may refuse to make an order for costs or may reduce the costs award under r 14.7 of the HCR. The Court can refuse or reduce costs because of any other reason.23
[30] The courts have been cautious to expand the scope of r 14.7(g) to cover impecunious parties because it may undermine the expediency and predictability of the High Court Rules cost regime.24 It may also have the effect of encouraging hopeless cases through the court if parties may be able to claim impecuniosity to avoid paying costs.25
[31] While the existing authorities on hardship or impecuniosity in costs awards are not consistent26, a key principle emerging from the cases is that financial hardship is not usually an answer to a claim for costs.27 Even an impecunious party should have to pay meaningful costs.28 The courts should apply the High Court Rules regime, unless there is good reason to depart from it.29 The personal circumstances of the party that failed in the proceeding need to be exceptional to depart from the general principle that the winner in a proceeding is awarded costs.30
[32] I do not consider there are exceptional circumstances in this proceeding that warrant a reduction of costs under r 14.7(g) due to claimed impecuniosity. The affidavit filed by Belinda as to her financial circumstances, shows that she and her husband have net assets of approximately $345,000.
[33] As to her complaint that she was required to file proceedings as a plaintiff, it was entirely her own choice to do so.
[34]In short, there is no basis to make a reduction in scale costs.
23 Rule 14.7(g).
24 Foni v Foliaki [2018] NZHC 3126.
25 Te Whare o Kaitaki Ngahere Incorp Society v West Coast Regional Council [2020] NZHC 2729 at [16].
26 Andrew Beck and others McGechan on Procedure, above n 17, at [HR14.7.01(e)].
27 Chesterfields Preschools Ltd v Commissioner of Inland Revenue [2011] NZCA 640 at [7]; and NM (Fiji) v Minister of Immigration [2020] NZHC 2729 at [8].
28 Te Whare o Kaitiaki Ngahere Incorp Society v West Coast Regional Council, above n 25, at [16].
29 At [9].
30 Foni v Foliaki, above n 24, at [11].
Should the Court order increased costs?
[35] Mr Waalkens QC, for Nicholas, submits that there are two bases for the award of increased costs: pursuing a claim which, from the outset, had no merit in either law or fact31 and a refusal to accept a reasonable settlement offer.32 Mr Waalkens submits that a combination of both of these matters justifies an uplift of 100 per cent. I will deal with each of the claimed bases in turn.
Claim lacking merit
[36] Rule 14.6(3) governs orders for increased costs. Increased costs may be awarded where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by taking or pursuing an argument that lacks merit.33
[37] I take into account the extent to which Belinda’s alleged failure to act reasonably contributed to the time or expense of this proceeding in determining whether to uplift 2B costs.34 That extent influences whether an uplift is justified.35
[38] I accept Mr Locke’s submission that the main focus of Nicholas’ case in defence of all the claims was in relation to the claim made by Danielle, Belinda’s mother. However, in advancing Belinda’s case, Mr Locke filed submissions that ran to 37 pages. The submissions were longer and cited a greater number of authorities (even putting to one side authorities which were cited by other claimants) than any of the other parties who had filed claims. I accept Mr Waalkens’ submission that it was a substantial task to reply to the submissions made on behalf of Belinda.
[39] I have already stated above that Belinda’s claim lacked merit and that it lacked the necessary evidential basis to bring her claim within the classes of grandchildren who have succeeded in other cases.
31 Rule 14.6(3)(b)(ii).
32 Rule 14(3)(b)(v).
33 Rule 14.6(3)(b)(ii).
34 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].
35 At [165].
[40] For the above reasons, I accept that Belinda contributed unnecessarily to the time or expense of the proceeding by taking and pursuing an argument that lacked merit.
Calderbank offer
[41] On 18 December 2020, Nicholas sent a Calderbank offer to all the claimants. The letter contained a brief analysis of what was said to be the weakness of Belinda’s claim and contained an offer of $20,000 in full and final settlement.
[42] Mr Locke acknowledges that the offer is relevant. But he says that it was made 18 months into the proceedings when the trial was three and a half months away. The letter contained no proposal regarding the payment of Belinda’s legal fees which at that stage totalled $80,312 (but on a contingency basis as noted above). He submits that the offer was more likely intended to bolster a future costs claim than one which was a genuine or realistic effort to achieve settlement.
[43] Increased costs may be awarded where the party opposing costs has failed, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.36
[44]Rule 14.10 of the HCR provides:
14.10 Written offers without prejudice except as to costs
(1)A party to a proceeding may make a written offer to another party at any time that –
(a)is expressly stated to be without prejudice except as to costs; and
(b)relates to an issue in the proceeding.
(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.
[45] In assessing whether a failure to accept a settlement offer is reasonable, the Court’s assessment is a broad one, taking into account the offer itself, its timing and
36 Rule 14.6(3)(b)(v).
size, the reasonable expectations of the party who refuses the offer, and whether the parties were in a position to assess the merits when the offer was received.37 The reasonableness of a party’s rejection of a r 14.10 offer is required to be assessed at the time of the rejection not against the subsequent result.
[46] While the offer of $20,000 was considerably less than the $625,000 Belinda claimed, the amount of $20,000 is the sum that Richard left in his will to each of his two stepsons and Nicholas’ former wife. Richard had considerably more contact with his stepsons and Nicholas’ former wife than he did with Belinda. I consider the offer was a reasonable one. Belinda’s expectations in her claim were unreasonable.
[47] The offer was made close to the commencement of trial, but the HCR provide for this. As the commentary in McGechan notes, the rule concerning Calderbank offers: “… permits an offer “at any time” which, in practical terms, means right up to the point judgment is delivered. …”.38
[48] At the time the offer was made, Belinda was in a position to assess the merits of the offer. Discovery had been provided and evidence had been filed. I accept that Belinda had incurred substantial legal costs (but on a contingency basis only) by that time. However, at the time of the rejection of the offer the weakness of the case should have been fully apparent to her. She continued with her proceeding disregarding established case law and the lack of an evidential basis for her claim.
[49] For all the above reasons, I consider Belinda’s rejection of the offer was unreasonable at the time she rejected it.
Increased costs overall
[50] Nicholas claims an uplift of 100 per cent on scale costs. That is an overall claim taking into account both Belinda’s taking and pursuing an argument that lacked merit and the rejection of the Calderbank offer.
37 New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548, 19 August 2010 at [36]; Samson v Mourant [2016] NZHC 1119 at [44]; and Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
38 McGechan on Procedure, above n 17, at [14.10.02(2)].
[51]I will similarly make my assessment on an overall basis.
[52] Any increase above 50 per cent is unlikely given that the daily recovery rate is two-thirds of the daily rate considered reasonable for the particular proceeding.39
[53] Where, in terms of r 14.6(3)(b)(ii) an argument lacked merit and was inherently unlikely to succeed, the increased costs apply to all steps.40 But in relation to an unreasonable refusal to accept a Calderbank offer, the uplift takes effect from the date the offer is refused. In this case the offer remained open until 14 January 2021. The uplift for failure to accept the Calderbank offer applies only from that date.
[54] Having regard to the approach in Holdfast NZ Ltd, a 100 per cent uplift is not justified, even when an uplift for the rejection of the Calderbank offer forms part of the overall uplift.
[55] Taken overall, I consider a reasonable uplift applied to all steps is 40 per cent of 2B scale costs.
Costs claimed for costs application
[56] Nicholas seeks costs of $2,500 for undertaking his costs claim against Belinda. The way in which the claim is calculated is not particularised. Mr Waalkens characterises it as a “nominal” award.
[57] It is well established that costs may be awarded in respect of an application for costs.41 An application for costs is to be treated no differently for costs purposes from an ordinary interlocutory application. Costs may be awarded according to scale or on an increased or indemnity basis as appropriate.42
[58] First, I am satisfied there should be an allowance. Nicholas has been successful on all of the points disputed by Belinda in the costs application save for the extent of
39 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47]–[48].
40 NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636; and Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434 at [57].
41 Body Corporate Administration v Mehta (No 4) [2013] NZHC 213 at [85] citing Auckland Regional Council v Arrigato Investments Ltd (2002) 16 PRNZ 217 (HC).
42 Body Corporate Administration v Mehta (No 4), above n 41, at [85].
the uplift sought. He claimed 100 per cent, whereas I have found a reasonable uplift is 40 per cent. In making his claim for costs, Mr Waalkens was put to the trouble of preparing a costs memorandum. Nicholas should have costs for the time preparing a memorandum reasonably took, but with some reduction because I have not upheld the extent of the uplift sought. I consider a reasonable time allocation by reference to Schedule 3 would be 0.4 days. Calculated on a category 2 basis, the amount is $956.
Stay application
[59] Finally, Belinda seeks a stay of enforcement of any costs award pending determination of her appeal against my substantive judgment. Mr Locke does not refer to any High Court rule or authority in support of the application made at this point.
[60] Mr Waalkens submits it is premature for Belinda to seek a stay of enforcement on any costs order before any such order has been made.
[61] It seems likely that Mr Locke is relying on r 17.29 of the HCR, which provides that a liable party may apply to the court for a stay of enforcement or other relief against the judgment upon the ground that a substantial miscarriage of justice would be likely to result if the judgment were enforced, and the court may give relief on just terms. This rule is concerned with the risk of substantial injustice resulting from enforcement of the judgment, not from the judgment itself.43
[62] The Court’s jurisdiction must inevitably follow any costs order and in the event that steps towards enforcement are taken. I refuse the application for a stay but that is without prejudice to an application being made in the event that Nicholas or the executors take steps to enforce the costs awards that I will make.
Result
[63]I award:
(a)$10,164.25 in standard 2B costs to the executors against Belinda; and
43 Palmerston North City Council v Birch [2012] NZHC 3248 at [17].
(b)$16,201.30 (standard 2B costs of $10,889.50 with an uplift of 40 per cent, $4,355.80 plus $956.00 on the costs application) to Nicholas against Belinda.
[64]I refuse Belinda’s application for a stay of enforcement of the costs awards.
Gordon J
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